What to Prepare for Your First Investment Planning Conversation

Assess Your Emergency Savings and Cash Flow

Before you begin investing, it is important to ensure your financial foundation is stable. According to the Basic Financial Planning Guide developed by MoneySense and the Monetary Authority of Singapore (MAS), a key rule of thumb is to set aside at least three to six months of your monthly expenses as emergency savings.

Having this safety net helps ensure you do not need to liquidate your investments prematurely if an unexpected expense arises. During your first conversation, it is helpful to have a clear picture of your monthly income and expenses to determine how much surplus cash you have available for investing.

Identify Your Financial Goals and Time Horizon

Think about what you are investing for. Common goals include buying a home, funding a child's education, or preparing for retirement. Each goal will have a different time horizon, which is the length of time you expect to hold an investment before you need the money.

Generally, a longer time horizon may allow you to weather short-term market fluctuations. Knowing your timeline helps in selecting investment products that align with when you need your funds.

Review Your Existing Insurance and CPF Statements

Your investment plan should work in harmony with your existing assets and protection. Gather your latest Central Provident Fund (CPF) statements to understand your Ordinary Account (OA) and Special Account (SA) balances. You may also want to review your current insurance policies.

Financial planning often involves understanding your existing protection before committing large sums to investments. MoneySense's current Basic Financial Planning Guide uses a general rule of thumb of spending at most 15% of take-home pay (income after CPF contributions) on insurance protection. The guide also notes that bundled products such as whole-life insurance may exceed this percentage because they contain both protection and investment elements. This is a general planning reference, not a personalised spending limit.

Understand Your Risk Tolerance

Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for the potential of higher returns. Every investment carries some level of risk, and market values can go down as well as up.

Be prepared to discuss how you feel about market volatility. A financial consultant can help you understand different asset classes, but knowing your own comfort level with risk is a vital starting point for any conversation.

A Note on Risks, Fees, and Projections

All investments involve costs, such as management fees or transaction charges, which can impact your total returns over time. It is important to ask about these fees during your planning session.

When reviewing investment illustrations, remember that non-guaranteed benefits are only projections based on specific assumptions. These figures are not certain and may be nil depending on market performance. Past performance is not an indicator of future results, and there is no assurance that any investment will achieve its objectives.

New to investing and still unsure where to start? You can ask Danny a question before deciding whether any next step is appropriate for you.